Company car expenses - Overview of the new regulations
The company tax reform led to new regulations in terms of deductibility of company cars. These changes will be introduced in two stages.
1. From tax year 2019 onwards (starting on 1 January 2018 at the earliest)
The tax system for car expense deductibility applicable to companies is introduced to the personal income tax, i.e.:
· Fuel remain 75% deductible;
· From now on, all other costs will be deductible depending on their CO2/km emissions (1) in accordance with applicable corporate regulations.
Costs relative to vehicles purchased before 1 January 2018 remain 75% deductible for personal and corporation tax.
2. From tax year 2021 onwards (starting on 1 January 2020 at the earliest)
Introduction of new tax deductibility rules linked to the CO2 emissions, both for personal and corporate tax, for all vehicle costs, including fuel:
· If the CO2 emission is higher than 200 gr/km; deductibility is set at 40%;
· In all other cases, the deductibility rate will be defined according to the following formula: 120% - (0,5% x coefficient (2) x number of grams of CO2 per km).
The deductibility rate thus defined cannot be lower than 50% or higher than 100% (end of 120% deductibility for full-electrical vehicles).
Moreover, a specific regime is in place for hybrid vehicles, i.e., which have a fuel engine and rechargeable battery.
For company and personal taxes, the new regulations will be only applicable to cars purchased before 1 January 2018.
(1) As provided for under Article 198 bis CIR 92
(2) This coefficient is set at 1 for diesel-powered engines and to 0.95 for other types of engines (petrol, LPG, biofuel, etc.)
New Profit Premium Plan
Programme Law of 25 December 2017 introduces a new deferred profit sharing plan for workers, allowing companies to reward their staff via a bonus without giving them a voting right in the company.
Legislator thus intended two categories of premiums:
· Identical profit premiums with an equal amount for all workers or an amount matching an equal percentage of their remuneration.
· Categorised profit premiums, the amount of which depends of a distribution key defined on the basis of objective criterion.
These profit premiums are granted through a unilateral decision of the employer approved by the board of directors and may not be recurrent or replace an existing remuneration. For the first category of premiums, a decision by the general meeting or the extraordinary general meeting will suffice.
These premiums will not be considered as remuneration from a social security perspective, but a 13.07% solidarity contribution from workers will be due. For tax purpose, these premiums will be subject to a 7% withholding tax borne by workers. Moreover, they are not deductible as professional expenses by employers. Contrary to the bonus CCT90, employers will not have to pay the solidarity contribution.
The maximum amount of benefits attributed annually will be limited to 30% of the total wage bill. The first premium may be granted on the basis of earnings closed on 30 September 2017 at the earliest.
Employers' social insurance contributions: new rates
Subsequently to the Tax Shift, the employers' social security contributions were reduced from 1 January 2018 as follows:
Number of workers
Employer’s contribution (in % of the gross remuneration)
From 1 to 9 workers
From 10 to 19 workers
20 workers and more
Please note that these rates are not applicable for workers of the non-market sector, with the exception of workers active in the sector of family helps and OAP (3) aiders, adapted work centres (AWC) and social insertion enterprises staff.
(3) Joint committees 318, 318.01 and 318.02.
(4) Joint committees 327, 327.01 and 327.03.
A new pension vehicle for the self-employed / private individuals
Since the beginning of this year and within the scope of the 80% regulation, legislator offers self-employed individuals the possibility to pay a « EIP » type benefit plan in addition to the Private Supplementary Pension for the Self-Employed (PSPSE).
This new mechanism was developed for the benefit of self-employed individuals with the exception of company managers - i.e., one-man businesses, and those working in liberal professions, both part-time and full-time.
Premium paid within the framework of this new pension agreement for self-employed individuals will benefit from a 30% tax break, allowing for a reduction of local taxes.
Registration duties: abolition of the 15% increased rates
In Wallonia, registration duties on real estate transmissions are usually set at 12.5%. In 2015, as part of its new competences within the framework of the 6th State Reform, registration duties went up to 15% if buyers already own 33% of the full ownership or the usufruct of 2 other houses.
Realising the “counter productivity for investments and the renovation of the Walloon real estate market” stemming from this increase, the Region wisely decided to abrogate the rule two years after its implementation.
1. Cash Registry System obligation: is it all over now?
VAT Circular 017/C/70 marks an end to the many questions raised about the cash registry system.
Owners or operators of restaurants or other premises where food is cooked must deliver tickets using a cash registry when their turnover (excluding VAT) for food or restaurant services is above 25.000 Euros
However, this rule is not limited to caterers and restaurateurs, but worries many professionals. Non-exhaustively, let us mention: hoteliers, some non-profit associations (ASBL), sports club, seminar organizers, leisure park owners, and some shopkeepers...
2. Limitation of power for tax inspectors in cases of faulty invoices
VAT Circular 2017/C/64 confirms the need to have a valid invoice to exercise the right to a tax deduction. Under the pressure of the Court of Justice of the European Union, the tax administration clarified the power of tax controllers when they face irregular and/or incomplete invoices.
From now on, tax controllers must also evaluate the right to deduct of the inspected individual by taking into consideration rectified invoices and/or related information to this invoice.
To ensure that they are entitled to a deduction, the inspected individuals must not be found guilty of fraud. The basic conditions of the right to deduct of the inspected individuals must be fulfilled and - particularly - the rectified invoice and/or supporting documents must be communicated before the end of the tax inspection.
3. No more VAT exemption for subcontractors taking part in international circulation of goods
The VAT Code exempts services related to the importation or exportation of goods (such as transport, unloading, packaging and storing) from tax (art. 41 §1er, 3°). This exemption also applies to services rendered by the subcontractors of the person/entity carrying out the main operation.
However, the Court of Justice of the European Union terminated the exemption from the extension of the duty to imports. According to the Court, this exemption is restrictively interpreted and only applies when services are “directly” supplied to the exporter, importer or the recipient of the goods. The VAT administration already confirmed that it shared the opinion of the Court and that a Circular was under preparation.
Limitation of some advantages and exoneration for taxable periods of less than one calendar year
For the 2018 tax returns (earnings 2017), some advantages and exoneration will be reduced in proportion with the tax period, both for personal taxation and for the taxation of non-resident natural persons (physical persons).
This targets the first bracket of exonerated interest for savings account, the maximum amount up to which copyrights are presumed to be savings income, tax-exempted percentage of income, maximum amount of payments within the framework of the Tax Shelter for start-up SMEs, etc.
The tax administration recently published a circular commenting this measure.
Business Continuity Act
The reform of the law on insolvency encompasses and amends the law on bankruptcies and the law regarding the continuity of enterprises. It will become effective on 1 May 2018.
The new Law highlights the prevention of insolvency and broadens the notion of company.
1. Extension of the scope of application of insolvency to all companies and entrepreneurs
Henceforth, the notion of company is that of a private individual engaging in a professional activity as a self-employed, every type of liberal profession, and any legal person in a commercial form and any other organisation without legal personality.
Are excluded: organisations without legal personality that do not distribute profits to its members, public entities and the State.
2. New responsibilities for managers and directors
In the event of the bankruptcy or impairment of assets, managers and directors can be personally liable - with or without solidarity - for all or some of the company’s debts if at any point before the bankruptcy, the company manager knew or should have known that there was obviously no reasonable perspective to preserve the company and avoid bankruptcy and did not act as a prudent and diligent director put in the same circumstances.
3. New obligation for accounting professionals under penalty
Accounting professionals who are aware - in the course of their mission - about serious and consistent offences likely to compromise the continuation of the company’s business activities must inform their client in writing and in details.
Tax Consult news
1. TC Tax Club - The seminars have started!
Our first VAT Cocktails and Tax Lunches started in January and proved hugely successful. We look forward to meeting you again soon during our forthcoming sessions. Don’t hesitate to check our website for more information.
2. VAT publication
Tax Consult was delighted to write a VAT article published in the Revue Trimestrielle de l’Ordre des Experts Comptables et Comptables Brevetés de Belgique (Q4 2017): « La nouvelle Circulaire TVA relative aux caisses enregistreuses… une indigestion en guise de dessert » (The new VAT Circular relative to cash registers... Difficult to digest...”).
VAT in the Middle East: Tac Consult reinforces its partnership with the United Arab Emirates and Saudi Arabia
On 1 January 2018, following the adoption of the “Common VAT Agreement of the States of the Gulf Cooperation Council (GCC”), the United Arab Emirates and Saudi Arabia adopted the VAT mechanism for their territories.
On the occasion of two recent visits to Dubai and Abu Dhabi, Tax Consult measured this new tax by weaving strong ties with its partners on the ground. Indeed, local actors and European companies active in these States could very well be impacted by this measure.
According to our information, other GCC members will also enforce this tax on their territories by January 2019.
3. New! Tax Consult also helps your for your Luxembourg VAT returns
Since the beginning of the month (March 2018), Tax Consult enjoys direct access to the Luxembourg tax administration portal. This access allows us to lodge every type of VAT return (monthly, quarterly and annual VAT tax returns or still, the recapitulative statements concerning intra-community operations).
These statements are prepared by Tax Consult’s VAT Department, which has recently been reinforced with a new collaborator. Our new colleague boasts several years experience in a VAT department of an international, Luxembourg-based tax-consulting firm.